Jose Arnulfo “Wick” Veloso joined the Philippine National Bank (PNB) as president and CEO in Nov. 16, 2018. Before PNB, he was with HSBC for 23 years as it’s first-ever Filipino CEO in the Philippines.
The stock price of PNB has reversed a six-year struggling trend, even gaining over $500 million within six months from Veloso’s appointment as CEO.
In this interview, he shares his turnaround strategy for PNB.
Q: What motivated you to join PNB considering the move entailed a major switch from an international bank to a century-old bank?
A: I have come to a point in my banking career where I want to play a more active role and help in nation building, in the crafting of bank strategy and its implementation. PNB has a multitude of opportunities to grow.
For close to a quarter century, I worked in a multinational bank. In HSBC, I learned so much. And now, I would like to bring what I know to PNB.
This institution has a strong presence in the provinces, and I want to implement what I have learned in banking to help my fellow Filipinos in the countryside. I would use my experience in banking to help support infrastructure, agriculture, manufacturing industries, consumer lending and help our customers fulfill their aspirations.
When Dr. Lucio Tan interviewed me for this role, he shared with me his vision for PNB. According to him, the word “Philippine” in PNB means so much to him because this is the place where he was able to make his name. His vision is totally aligned with what I would like to do for the rest of my career, which is to grow the Philippine economy and help alleviate the lives of the Filipino people especially in the provinces.
He also shared with me that a vast number of our Filipino workers are overseas and would like me to find ways to help grow the Philippine economy so that they can come back to a more vibrant and progressive country.
Q: Fintech firms have been disrupting banks with faster, cheaper and more convenient apps to get loans and remittances for the unbanked. What are your plans to tap the unbanked that is twice the number of people compared to those in the formal banking industry?
A: I have always challenged my management team: if we really do understand the business of banking then why do money lending investors exist? That means we have not been trying hard enough to understand the needs of the people.
We need to look at how these unbanked were on-boarded by money lenders and how they became comfortable with them. It boils down to a different credit review process. By using appropriate technology and a quick turnaround time, money lenders address concerns of borrowers by fulfilling their need when they need it most.
PNB is investing in technology just like any other bank that is innovating. Please take note that technology is significantly improving every day. We believe that the high cost of technology will eventually lower as more competitors in the fintech world provide easier and simpler solutions.
In the meantime, we want to make sure that we have the basics before we embark on a full end-to-end process.
Over the medium term, there will be vast improvements in our digital banking as we are now being guided by big data. The first movers in this innovative space are going to spend a lot. We believe that by providing the basic services in our digital platform now, we will be able to leapfrog our competitors when the cost of technology is significantly cheaper.
Now, let me go back to banking the unbanked. Our long-term goal is to create a subsidiary, a joint venture with a company that is engaged in microfinance. We want this to be a totally different operation separate from the bank.
We need people who can reach and bank the C and D markets. These may not be college graduates but people in the community like housewives, leaders, those in the farms and in the wet markets. What we would like to do is to build a new platform that is able to do microfinance, focused on our overseas kababayans and employees in the provinces.
Hopefully within five years, 10 percent of PNB’s loan portfolio will be allocated to microfinance. We are already in discussions with a company and hopefully we can do a deal before the end of the year.
Q: PNB was once the biggest bank in the Philippines. Today, it is number five in equity and less than a third of the largest bank. What are your top priorities as president of PNB?
A: Our primary strategy is to embark on safe aggressive growth.
We will continue to grow our corporate book as well as our commercial banking business where PNB is already strong. Two-thirds of the branches of PNB are in the provinces, and we will continue to service these customers together with the large local companies that are involved in big infrastructure projects.
We cannot ignore the large local corporates. Major transactions end up with them due to their ability to handle large transactions that need huge amounts of capital.
Over the medium term, we will build our consumer loan business. Currently, we are merging PNB Savings Bank into the main bank. This will allow the 712 strategically located PNB branches a network that will support this initiative efficiently.
All banks are in this type of business, but PNB has got strong and loyal commercial banking customers whom we will continue to service and tap in the provinces.
During my first six months in the bank, we focused on getting the bank ready for our strategy. As the second semester begins, we are well into the execution stage where I am focusing on turnaround time and customer experience.
By pushing more of our resources and energies to businesses, which give bigger returns, our existing strategy continues to work. Our marching orders are to grow within industry. Some of the details of the strategies we employ:
- We would like to grow our consumer finance business from 10 percent to 20 percent of our total loan portfolio within the next three years by accelerating the growth of this segment together with SME (small and medium-sized enterprises) lending in all branches around the archipelago. By folding in our PNB Savings into the main bank, we will take advantage of our 712 branches across the country.
- We have 76 offices in 16 countries. Right now, 90 percent of their focus is on remittance. Over the medium term, we target to build the capabilities of our international network by booking more consumer finance products such as PNB’s “Own a Philippine Home Loan.” It is a unique product that only PNB can offer overseas, having full banking licenses in various jurisdictions like the United States, Hong Kong, Japan and Singapore. It is a convenient way for overseas customers to apply, book and pay for these loans without having to come to the Philippines.
- Help marginalized Filipinos by giving them access to affordable financing. This frees them from usurious rates prevalent in the microfinance business.
- Strengthen our digital technology capability to make end-to-end banking seamless for our customers. As we grow all our businesses, we shall arm our colleagues with better tools to delight our customers using technology and improved processes. By partnering with technology leaders, we will build technology internally to make banking safer and easier for our customers.
PNB also offers investment opportunities for overseas Filipinos. Our range of UITF (unit investment trust fund) products provide an excellent avenue for our kababayans to grow their hard-earned incomes, to ensure a stable future for them and their loved ones.
Q: Many banks do or offer the same thing. How will you differentiate PNB?
A: Apart from our expansive reach locally and abroad, one of the best traits of PNB is that our Filipino middle-income and low-income segment customers are not intimidated to speak with our officers.
Our customers do not feel like they are speaking to bankers, but they feel like speaking to friends whom they can trust. Our staff, especially in the provinces, are known to be hospitable and approachable. PNB is part of the local community. We are their partners, their neighbors that holistically help them in their financial needs.
Q: You plan to double return on equity (ROE) from a yearly average of 5.8 percent before you took over to 12 percent in three years, a level last done in 2013. What have you done so far?
A: At the start of my tenure, ROE of our core business was at 5.2 percent. Currently, it is at 5.9 percent. We plan to improve [this] to 7 percent by next year and between 9 percent and 10 percent on the third year.
However, please take note that I told the team to aim for 12 percent within three years because it would be an injustice to Dr. Lucio Tan if I told the team to only shoot for the moon and not for the stars.
We have increased our core profits same time last year by 32 percent, and we have grown our total resources by 25 percent.
Like other banks, we are cross-selling and building technology to help operate more efficiently. We have a solid brick-and-mortar network that covers the archipelago and key cities around the globe. These have worked conventionally. We are building technologies around them and this is what will help us meet our targets.
Q: What would you like the public to know that they still do not know yet?
A: Some still think that PNB is a government bank. We were established in 1916. And over the years, we were granted full banking licenses in Japan, Singapore, Hong Kong and the United States, specifically in the state of New York and California. Subsidiaries in China and the United Kingdom can connect PNB’s vast domestic reach to those that provide commerce to the Philippines abroad.
During our bond offering road show, lots of analysts were not familiar with PNB’s management, strategy and vision.
PNB is a strong organization. A testament to it is the commendable efforts of the PNB’s biggest resource—the extremely hardworking and dedicated men and women located all over the country and abroad.
Our recent achievements coupled with the bank’s strategy is already proof that PNB is a sleeping giant that is finally awake. —CONTRIBUTED